Water & Wastewater Treatment Magazine
Issue link: https://read.utilityweek.co.uk/i/971076
THE DISRUPTION: PROCUREMENT TECHNOLOGIES What's the deal: New procurement technologies promise to open up new horizons for process efficiency and rela onship management with supply chain partners – or so vendors claim. The key advances in recent years which differen ate new procurement systems from old, relate to automa on which can strip cost out of core procurement processes as well as removing human error. And in a new round of technological progress, these system improvements will be overlaid with increasingly adept ar ficial intelligence (AI) that can help u li es make be er procurement choices and monitor supplier performance. In U lity Week Live's disrup on survey around 58 per cent of u lity respondents said new procurement technologies are changing the way they interact with their supply chain, with the highest levels of disrup on reported from water (59.4 per cent) and energy networks (55.4 per cent). Why it ma ers: U li es are under pressure to push the envelope on efficiency and innova on. Retailers need to cut out waste to relieve a ght squeeze on margins while regulated u li es must answer increasing demands for evidence they are improving the value for money that consumers get from their monopoly providers. Procurement is a key opportunity area for businesses seeking to respond to these pressures. It includes a range of business processes ripe for automa on – such as invoicing and genera ng contracts – as well as opportuni es to apply AI to the selec on of supply chain partners. In other industries, AI is already being used in this way, scanning disparate informa on about the past performance of viable firms for signs of strength and weakness which are relevant to a new contract, and shortlis ng the best companies for considera on by human decision makers. The cost of implemen ng such clever procurement technology is rela vely low thanks to many solu ons being cloud-based. For suppliers, these developments in procurement opportunity may be welcome on the one hand but disturbing on the other. Greater efficiency in invoice processing ought to reduce late payments, for example. On the other hand though, it's unclear how using machine learning to assist with supplier selec on and the awarding of contracts might impact the compe ve landscape for suppliers. THE DISRUPTION: ASSET-LIGHT NETWORKS What's the deal? The concept of "asset light" u lity infrastructure operators is arguably a logical extension of the considerable degree to which construc on and maintenance of u lity assets are already delegated to key contrac ng partners. The idea essen ally involves today's monopoly u li es – our energy networks and water companies – taking a declining stake in asset ownership, instead building capability to operate their systems at a high level, managing data flows and overseeing new markets for balancing demand and supply. Meanwhile, current er one suppliers or new entrants could compete to provide system capacity and enabling infrastructure. According to our survey, it's a direc on of travel a significant minority of supply chain partners are keen to pursue. Over a third (36.5 per cent) said they believe their company could undertake the bulk of infrastructure management as a service to u lity companies within the next ten years. Why it ma ers: A total shi to asset-light u lity networks would be a radical step for the industry. It would significantly shi the risk profile of today's asset-heavy monopoly network operators, heavily impac ng their value proposi on to investors. Nevertheless, it may be inevitable. At U lity Week Live 2016, UK Power Networks' chief execu ve Basil Scarsella openly speculated about the poten al for networks to follow the models pioneered by the likes of Airbnb and Uber which have rapidly risen to become the largest hotel and taxi companies in the world, but which own no hotels or cabs. Such a model might become increasingly a rac ve in the energy system as distribu on network operators move to take on roles as distribu on system operators, Scarsella implied. Meanwhile, recent regulatory developments suggest Ofgem and Ofwat too see benefits a ached to decentralising asset ownership for u li es. In water, the ini a on of direct procurement for customers will similarly provide an opportunity for ambi ous contractors to directly own, maintain and operate increasing propor ons of cri cal na onal infrastructure as a service to water companies who will retain responsibility for service quality and con nuity. For suppliers, developments in procurement technology may be welcome on the one hand but disturbing on the other P R E S E N T S 30 | MAY 2018 | WWT | www.wwtonline.co.uk